To contribute to the fight against climate change, the MDBs have to date largely operated under what we refer to as a Climate Finance Paradigm. That paradigm involves defining, tracking, and maximizing the amount of climate finance that MDBs provide and mobilize. Climate finance has been important to moving toward global climate goals and will continue to be vital going forward. However, given the urgency of the challenge and the rate at which the world must reduce emissions, the current paradigm is not enough. A different paradigm is needed, a Paris Alignment Paradigm that builds on the successes of the Climate Finance Paradigm but that also makes full use of the MDBs’ capacity to advance Paris Agreement implementation. This involves not only maximizing volumes of climate finance, but also gradually bringing the rest of the MDBs’ pipelines and portfolios into alignment with the requirements of the Paris Agreement.

The report seeks to answer the following questions:

  • How are MDBs supporting NDCs and long-term climate-related planning?
  • How can the MDBs know if their investments are in line with the Paris Agreement temperature goal?
  • How are the MDBs mainstreaming climate adaptation and resilience across their investments?
  • How transparent are the MDBs on climate-related activities and investments?

The report is based on an extensive review of policy and academic literature and official documents. We also conducted semi-structured interviews with 115 MDB staff, representatives from MDB member countries, and other relevant stakeholders. Interviews took place at the headquarters of several MDBs and in seven countries that receive MDB finance: Argentina, Brazil, India, Kazakhstan, Sri Lanka, Tunisia, and Uganda.

Key Findings

Multilateral development banks (MDBs) play a critical role in limiting climate change and helping communities adapt to its impacts. Now is the time for these important financial institutions to step up as climate action leaders and transition to a Paris alignment paradigm, ensuring that all their investments are consistent with the sustainable and resilient development the world needs.

  • The MDBs need to shift from a focus on climate finance (what we call a "Climate Finance Paradigm") to an emphasis on Paris Alignment (a "Paris Alignment Paradigm"). This means looking at not only their climate finance, but also the relationship of the rest of their portfolio to the global climate goals.
  • On mitigation, the MDBs should embrace the need for net zero CO2 emissions by mid-century. This means, for example, that the banks need to move swiftly within the next few years stop supporting energy sources that create CO2 emissions.
  • On adaptation, the MDBs should move beyond high-level screening and one-off model adaptation initiatives to thorough mainstreaming of climate risks. This includes planning for a world that is 3-4°C warmer than today.
  • The MDBs should also champion NDCs (which includes helping countries strengthen their first round of NDCs) and embrace transparency on how they are supporting the global climate goals.